On September 19, the Federal Energy Regulatory Commission (FERC
or the Commission) issued the latest in its series of declaratory
orders that disclaimed jurisdiction over nonpipeline gas
transportation operations.1 In our
recent client alert, issued on September 12, we discussed
recent responses of the Commission to similar requests for findings
of nonjurisdictional status concerning planned natural gas
operations.2 In this case, FERC was asked to rule on the
planned operations of Emera CNG, LLC (Emera). Although the outcome
of the declaratory order was as requested by the filing parties,
the real news once again was Commissioner Bay's dissent, in
which he continued to express a more expansive view of FERC
jurisdiction under the Natural Gas Act (NGA).
Following a pattern adopted previously by others, Emera filed a
petition for a declaratory order, requesting that the Commission
declare that Emera's construction and operation of facilities
to produce compressed natural gas (CNG) will not be subject to FERC
jurisdiction under the NGA. Emera plans to receive natural gas at a
facility in Palm Beach, Florida, from the Riviera Lateral, a
Hinshaw pipeline exempt from FERC jurisdiction. Emera would then
compress and truck the gas in International Standards Organization
containers a distance of approximately a quarter mile to a berth at
the Port of Palm Beach, where the containers would be loaded onto
roll-on/roll-off oceangoing carriers. The CNG would then be shipped
from Florida to Grand Bahama Island, decompressed, and injected
into a pipeline for transport to electric generation plants owned
and operated by Grand Bahama Power Company, an Emera
affiliate.
In the Emera Order, the Commission explained its jurisdiction under
Section 3 of the NGA would apply only if Emera's facility were
deemed to be an "export facility." FERC has traditionally
only exercised its authority under Section 3 over import and export
facilities to regulate (1) pipelines that transport natural gas to
or from the United States' international borders; and (2)
coastal liquefied natural gas (LNG) terminals that are accessible
to oceangoing LNG tankers and connected to pipelines that deliver
gas to or take gas away from the terminal. Emera's facility
will not include a pipeline to deliver gas to an international
border or be capable of transferring CNG directly into an
oceangoing carrier for export. The Commission therefore held that
Emera's facilities are unlike the border-crossing pipelines and
coastal LNG terminals that the Commission has traditionally
regulated. Instead, the Commission likened Emera's facilities
to existing unregulated facilities that deliver LNG onto trucks
that are subsequently driven across the border into Canada or
Mexico.
Once again displaying his independence, Commissioner Bay sharply
disagreed with the majority's reasoning, finding instead that
"Congress stated that the provisions of the [NGA]
'shall' apply to 'the importation or exportation of
natural gas in foreign commerce and to persons engaged in such
importation or exportation.'"3 Based on this
language, Bay reasoned, Emera's facilities clearly fall under
Commission jurisdiction. Specifically, Bay took issue with the
Commission conflating the limitations of Section 7 with those of
Section 3, arguing that Section 3's regulation of "export
facilities" applies to Emera's planned operations. The
fact that the gas will be compressed onshore, then loaded onto
shipping containers, cannot, Bay reasoned, provide the factual
predicate for declaring that FERC jurisdiction does not
attach.4
The majority's ruling in this case bodes well for developers of
other CNG or LNG operations seeking to serve new markets, as the
ruling potentially lessens the regulatory burden faced by similar
projects. However, Commissioner Bay will be the Chairman next
spring, and given his dissent in this order and in the recent
Pivotal and Shell LNG orders, these matters are far from settled.
Future Chairman Bay has again demonstrated he will take a more
sweeping view of FERC jurisdiction over gas projects than his
fellow Commissioners.
[1] Emera CNG, LLC, 148 FERC ¶ 61,219 (2014) (Emera Order).
[2] Shell U.S. Gas & Power, LLC, 148 FERC ¶ 61,163 (2014); Pivotal LNG, Inc., 148 FERC ¶ 61,164 (2014).
[3] Emera Order (Bay, dissenting) (citing 15 U.S.C. § 717(b)).
[4] "It cannot be that the Commission's jurisdiction turns on this 440-yard truck journey." Emera Order (Bay, dissenting). Bay also noted that Emera applied to the Department of Energy – under Section 3 of the Natural Gas Act – "for long-term authorization to export CNG from" its proposed facility. Id.
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